An application for registration should be submitted to the registrar of companies with the following documents:

1. Memorandum of Association;

2. Articles of Association;

3. A declaration signed by a person named in the articles of the proposed company as a director, manager, or secretary of the company, or by an advocate of the Supreme Court or High Court, or by an attorney entitled to appear before the High Court, or by a chartered accountant practicing in India stating that all the requirements of the Companies Act 1956 and the applicable rules with respect to the registration and other matters have been complied with;

4. A list of persons who have consented to act as directors of the company.

5. If the proposed company is a public company, consent of very person prepared to act as a director must be submitted in a prescribed form;

6. Information about directors, managing directors and managers and secretary must be submitted in a prescribed form;

7. Information about the registered office in a prescribed form;

8. Power of attorney in favor of one of the promoters or any other person, authorizing him/her to make corrections in the documents submitted to the registrar of the companies, if it becomes necessary; and

9. Applicable registration fee payable to the registrar of the companies.

Advantages of Incorporating in India

Many tax exemptions available to the company set up in Special Economic Zone;

Many tax incentives available to IT companies;

India has got double taxation treaties with many countries;

Only INR 100 000 (US $ 2500 approximately) is required to form a private company;

Skilled and intelligent employees available at nominal rate;

With its large base of English speaking skilled human resource, it is most sought after destination for business process outsourcing, Knowledge processing etc.

Definition of a Private Limited Company:

A Private Limited Company is a Company limited by shares in which there can be maximum 50 shareholders, no invitation can be made to the public for subscription of shares or debentures, cannot make or accept deposits from Public and there are restriction on the transfer of shares. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 2.

Definition of a Public Limited Company:

A Public Limited Company is a Company limited by shares in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 7.

The entity is best suited:

The choice of entity depends on circumstance of each case. Private Limited Company has lesser number of compliances requirements. Therefore, generally where there is no requirement of raising of finances through a public issue and the ownership is intended to be closely held by limited number of persons, Private Limited Company is the best choice.

The minimum paid-up capital of a Private Limited Company:

The minimum paid up capital at the time of incorporation of a private limited company has to be Indian Rupees 1, 00,000. There is no upper limit on having the authorized capital and the paid up capital. It can be increased any time, by payment of additional stamp duty and registration fee.

The difference between authorized capital and paid up capital:

The authorized capital is the capital limit authorized by the Registrar of Companies up to which the shares can be issued to the members / public, as the case may be. The paid up share capital is the paid portion of the capital subscribed by the shareholders.

The procedure in obtaining a name approval for the proposed Company:

An application in Form No. 1A needs to be filed with the Registrar of Companies (ROC) of the state in which the Registered Office of the proposed Company is to be situated. The application is required to be signed by one of the promoters. The details to be state in the said application are as follows:

1. Four alternative names for the proposed company. (The name can be coined names from the objects of the proposed company or the names of the directors, etc. but should definitely be indicative of the main object of the company. Justification for the name needs to be specified along with the application)

2. Names and addresses of the promoters (Minimum 7 for a public company while 2 for private company).

3. Authorized Capital of the proposed company.

4. Main objects of the proposed company.

5. Names of other group companies.

On submitting the application, the ROC scrutinizes the same and sends the approval / objections in about 10 days to the applicant. On fulfilling of the objections a formal letter of name approval is issued.

The Memorandum of Association (MOA) and the Articles of Association (AOA) of a company and the procedure in their regard:

On receipt of the name approval letter from the ROC the MOA and the AOA are required to be drafted. The MOA states the main, ancillary / subsidiary and other objects of the proposed company. The AOA contains the rules and procedures for the routine conduct of the proposed company. It also states the authorized share capital of the proposed company and the names of its first / permanent directors. Later MOA and AOA are required to be stamped.

A stamp duty is required to be paid on the MOA and on the AOA. The stamp duty depends on the authorized share capital.

The documents required to be executed for incorporation:

The following documents are required to be executed (signed) before they are submitted to the ROC:

MOA and AOA - These are required to be executed by the promoters in their own hand in the presence of a witness in quadruplicate stating their full name, father’s name, residential address, occupation, number of shares subscribed for, etc.

Form No. 1 - This is a declaration to be executed on a non-judicial stamp paper of INR 20 by one of the directors of the proposed company or other specified persons such as Attorneys or Advocates, etc. stating that all the requirements of the incorporation have been complied with.

Form No. 18 - This is a form to be filed by one of the directors of the company informing the ROC the registered office of the proposed company.

Form No. 29 - This is a consent obtained from all the proposed directors of the proposed company to act as directors of the proposed company. (Not required in case of private company).

Form No. 32 - This is a form stating the fact of appointment of the proposed directors on the board of directors from the date of incorporation of the proposed company and is signed by one of the proposed directors.

Name approval letter in original.

Power of Attorney signed by all the subscribers of MOA authorizing one of the subscribers or any other person to act on their behalf for the purpose of incorporation and accepting the certificate of incorporation.

Power of Attorney in case of a subscriber who has appointed another person to sign the MOA on his behalf.

Filing fees as may be applicable.

Procedure of issuance of a certificate of incorporation:

After the documents in point 5 of above, are filed, the ROC calls the attorney on a specific date for scrutiny and making the corrections in the MOA and AOA filed. On complying with the same, the certificate of incorporation is granted to the attorney.

Time to start the operations for the newly formed company of its business:

On receipt of the certificate of incorporation, the public company has to complete certain other legal formalities such as a statutory meeting (within 6 months), statutory report, etc. On completion of the said formalities and on filing of the statutory report with the ROC the ROC issues the certification of commencement of business to the company. Thereafter, the Public Company can start the business operations. The Private Company can start its business immediately on incorporation.

Procedure of comply with the legal formalities when the party is not stationed in India?

You can give Power of Attorney to a person to sign the documents on your behalf. After the Company is incorporated, you can appoint Alternate Directors, to function on your behalf while you are not in India. But at least once, you should be in India within one month of the incorporation of the Company. There can be one meeting of Board of Directors during your stay in India and all other formalities including those of appointment of Alternate Directors can be complied with.

Other approvals are required for foreign investor in India:

Generally, prior approval is required from the RBI before investing in India. Some categories of businesses are covered under automatic approval process. However, one has to apply for the same. There are some post-incorporation filing formalities after the remittance of capital from overseas to India and on issue of shares.

It is mandatory for foreign investors to obtain governmental approval for incorporating in India or forming a joint venture in India. In some sectors certain restrictions apply. Proper legal advice must be obtained before incorporating in India to ascertain the eligibility and applicable restrictions.****

Other formalities before or after incorporation:

Obtaining Permanent Account Number (PAN) from Income Tax Department

Obeying Shop and Establishments Act

Registration for Import Export code from Director General of Foreign Trade

Software Technologies Parks of India registration (STPI) if required

RBI approvals, if required.

Requirement of the compliance for Companies in India:

All the companies who are related cyber business are required to comply with the requirements of the law.

Corporate Compliance Programs in India for companies / corporations Doing Business in India

All the companies doing business in India are required to comply with laws and regulations of India. All the companies who are related cyber business are required to comply with the requirements of the law.

In addition, all the Multinational Companies Doing Business in India and having cyber involvement are required to comply with the corporate and other laws of India including cyber law compliance.

The cyber law mandates all companies to have an information technology security policy. This document the architecture of the network, the roles and responsibility of employees, security parameters and authorization required for data access, among other things. Other compliances that are required include relate to retention and authentication of electronic records and security of data.

In some instances the directors and members of a company can be personally held liable. The following provisions of the Indian Companies Act, 1956 provide that the Members or the Directors/officers of a company will be personally liable if:

A company carries on business for more than six months after the number of its members has been reduced below seven in the case of a public company and two in the case of a private company. Every person who was a member of the company during the time when it carried on business after those six months and who was aware of this fact, shall be severally liable for all debts contracted after six months,

The application money of those applicants to whom no shares has been allotted is not repaid within 130 days of the date of issue of the prospectus, then the Directors shall be jointly and severally liable to repay that money with the prescribed interest ,

an officer of the company or any other person acts on its behalf and enters into a contract or signs a negotiable instrument without fully writing the name of the company, then such officer or person shall be personally liable,

The court refuses to treat the subsidiary company as a separate entity and instead treat it as only a branch of the holding company,

In the course of winding up of the company, it appears that the business of the company has been carried on with intent to defraud the creditors of the company or any other person or for any fraudulent purpose, al those who were aware of such fraud shall be personally liable without any limitation of liability.

Moreover, Indian Information Technology Act of 2000 provides for further personal liabilities. For example, Section 85(1) of the IT Act provides that where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made there under is a Company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

The proviso to section 85 (1) provides that such person will not be liable for punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

Section 85(2) of the IT Act provides that where a contravention of any of the provisions of this Act or of any rule, direction or order made there under has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

The explanation to section 85 provides that the expressions "company" means any body corporate and includes a firm or other association of individuals and the expression "director", in relation to a firm, means a partner in the firm.

All the Indian companies and all foreign companies doing business in India, either directly or indirectly, should comply with this law.

It is mandatory to set up corporate compliance programs including cyber law compliance program. If you company does not have the compliance program, then contact us to help you set up one for you.****